World War II vet Frank Whitney is locked in a legal battle with officials who want to take his Saltaire Market grocery by eminent domain in order to build their own updated version.

And the upscale village may increase property taxes to do it, raising as much as $2.5 million to buy and rebuild the market, which was damaged during Hurricane Sandy.

Whitney’s family says it wants to fix the store — the village’s only commercial property — and has the money to do so, but it accuses Saltaire officials of preventing them.

“Our choice was to rebuild,” Whitney, 88, says in a film his family produced to publicize their plight. “It’s not fair. What they did is not fair.”

The controversy has roiled the beach town of 400 homes, whose residents include real-estate mogul Barbara Corcoran.

The village Board of Trustees’ Aug. 31 vote to pursue eminent-domain proceedings has left some residents baffled.

“There is almost nobody I have spoken to in the town that supports this eminent-domain action,” said best-selling author David Fisher.

Actress Kathleen Butler, who has summered in Saltaire for years, called the move “disgraceful, absolutely disgraceful.”

Whitney has owned the wood-shingled Saltaire Market complex for 25 years. In addition to a store that sold everything from produce to beach pails, there was a deli, liquor store and ice-cream shop.

Whitney’s son, Scott, said four engineering reports, including two commissioned by the village, found the damage from Sandy was not substantial. There was less than two feet of water in the complex, and the Whitneys removed floors and walls to replace them.

“The repairs that are required due to the flooding . . . do not appear to me to be substantial improvements as defined in the Building Code,” reads one village-commissioned report.

But the village has variously argued that the damage was so vast that an onerous approval process was needed to rebuild or that the plans submitted by the Whitneys were incomplete.

The village applied for a $1.5 million state waterfront-improvement grant on Aug. 12 to acquire the market.

The application was filed three weeks before trustees voted to pursue eminent domain, yet Mayor Robert Cox III told The Post days before the vote that he was unaware of any grant requests.

The state Department of State denied the request this month.

Saltaire sought $2.5 million in state funds in 2009 to buy the market, but the grant program was meant for distressed communities and the proposal was rejected.

Both sides are now fighting it out in the Appellate Division in Brooklyn.

Cox told The Post that if the condemnation went forward, it would be paid for by raising village taxes, floating a bond or selling off village property.